Minnesota State Tax Credits

More ways to save your hard-earned money from the tax man!

Minnesota has some great State Tax Credit for you.

Thank you so much for checking our resource out here for your state and congratulations for taking a proactive step to paying less in taxes. For your state, we have identified the tax credits that are currently being offered to help you pay less in state taxes.

We hope this resource is helpful to you, and if there is something you feel we have missed, please let us know!

It would be completely arrogant of us to think that we know all things and if we missed something we want to know so we can vet that and help you and our other friends in the entrepreneurial community pay less in taxes! And if you found this helpful, you should check out our DIY resources inside of our Tax Savings Communities (found at www.MakeTaxesFair.com/Our-Communities).

We're also ready to help you if you want to skip the line of the DIY process and get help directly from us. To learn more about how we help our clients check out www.MakeTaxesFair.com/Get-My-Roadmap
Minnesota

Minnesota Enterprise Zone Credit

Overview:
The Minnesota Enterprise Zone Credit supports businesses that invest and create jobs in designated Border-Cities Enterprise Zones. Approved companies may receive income tax credits, property tax credits, and sales tax exemptions related to construction and expansion activities, tailored to their business entity type.

Who It’s For:
Businesses operating in specific enterprise zones—Breckenridge, Dilworth, East Grand Forks, Moorhead, Ortonville, and Taylors Falls—across all entity types (C Corps, S Corps, Partnerships, Sole Proprietors, Trusts).

Four Key Highlights:

  1. Multi-Type Tax Benefits Available
    Income, property, and sales tax incentives are available, depending on the business type and qualifying activity.

  2. Job Creation & Investment Required
    Credits are contingent on demonstrable economic impact through new jobs or facility investment in the zone.

  3. DEED Certification is Mandatory
    Businesses must be certified by the Minnesota Department of Employment and Economic Development (DEED) before claiming credits.

  4. Entity-Specific Filing Process
    Credits are claimed via specific forms (M4, M8, M2, M3, KPI/KS, or personal returns) and often distributed through partner/shareholder schedules.

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Minnesota Angel Tax Credit Program

Overview:
The Minnesota Angel Tax Credit provides a 25% refundable tax credit to investors who fund early-stage, high-tech businesses in the state. It supports innovation and entrepreneurship by attracting capital to startups working in proprietary technologies and advanced industries.

Who It’s For:
Individual investors (including non-residents and foreign nationals) or investment funds investing in certified Minnesota startups engaged in high-tech, biotech, or other approved innovation sectors.

Four Key Highlights:

  1. 25% Refundable Credit for Equity Investments
    Investors can claim up to $125,000 per person annually ($250,000 if filing jointly) with credits issued on a first-come, first-served basis.

  2. Targeted Support for High-Tech Startups
    Only companies in proprietary tech sectors like biotechnology, medical devices, and renewable energy are eligible; traditional industries and professional services are excluded.

  3. Strict Business Eligibility Requirements
    Startups must be headquartered in Minnesota, employ <25 staff, and have less than $4 million in prior qualified investments to qualify.

  4. Annual Certification & Investment Limits
    Businesses must be certified by DEED before investments are made; a $1 million lifetime cap applies per business, and total statewide credits are limited to $10 million annually.

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Minnesota SEED Capital Investment Program

Overview:
The Minnesota SEED Capital Investment Program offers a 45% non-refundable tax credit to investors who support innovative businesses located in designated border cities. Designed to stimulate local economic growth, the program encourages early-stage investments in certified companies.

Who It’s For:
Investors making equity investments in certified businesses located in Minnesota’s border cities—Breckenridge, Dilworth, East Grand Forks, Moorhead, and Ortonville.

Four Key Highlights:

  1. 45% Tax Credit on Qualified Investments
    Investors can earn up to $112,500 annually; credit is non-refundable but can offset tax liability.

  2. Limited to Border Cities & Certified Businesses
    Only investments in DEED-certified businesses located in the five designated cities are eligible.

  3. Carryforward Allowed for Four Years
    Unused credits may be carried forward for up to four tax years.

  4. Pre-Approval & Allocation Cap Required
    Businesses must be certified by DEED before investment; credits are limited per city and may run out before year-end.

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Minnesota Credit for Increasing Research Activities (R&D Tax Credit)

Overview:
Minnesota’s R&D Tax Credit rewards businesses conducting qualifying research within the state. Companies can earn a nonrefundable credit of up to 10% on the first $2 million in qualified R&D expenses and 4% thereafter. The credit aligns with IRC Section 41 and supports innovation across industries.

Who It’s For:
Minnesota-based corporations and pass-through entities performing eligible R&D activities within the state, as well as individual taxpayers receiving distributed credits.

Four Key Highlights:

  1. Up to 10% Credit on Qualifying R&D
    Earn 10% on the first $2M of qualified R&D expenses and 4% on expenses above that threshold.

  2. Must Follow IRC Section 41 Rules
    Research must be technological in nature, aiming to develop or improve business components, and conducted in Minnesota.

  3. Nonrefundable but Long Carryforward
    While the credit can’t trigger a refund, unused credits may be carried forward for up to 15 years.

  4. Pass-Through Entity Rules Apply
    Partnerships and S-corps must pass the credit through to owners/shareholders using Schedules KPI or KS.

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